Export to India on downturn

Country's exports to the Indian market dropped substantially in the just-concluded fiscal even though Delhi allowed duty-free access of products from the next-door neighbour to make up for a perennial trade imbalance it suffers.
In the fiscal year (FY) 2013-14, Bangladesh exported goods worth about 456.633 million US dollars to India as against $563.960 in the previous fiscal. The gap marks a negative growth of 19.03 per cent.
Export trade with India was gradually improving, reaching over half-a-billion- dollar mark in 2012-13 from $289.42 million in 2006-07. But the last fiscal was an exception, although export of readymade garment (RMG) products increased substantially during the period under review.  
Analysts and businessmen attributed the setback mainly to appreciation of the local currency against the Indian Rupee and various non-tariff barriers (NTBs) like testing and certification, and weak border infrastructure that dampen the export potential to the neighouring country. Some of them also blamed "diplomatic failure" for the situation.
Even after duty-free access of RMG to India, Bangladesh could not post any significant growth in export. The main causes being specifically pointed out are non-tariff barriers and government's lack of initiative in negotiation with the counterpart on different trade-related issues.
Bangladesh's exports to India had increased substantially over the last couple of years since Dr. Manmohan Singh had eased the sensitive item list of his country and thereby allowed duty-and quota-free access of about 46 Bangladeshi garment products.
But the tempo of export has slowed down in recent times due to depreciation of the rupee. The Indian currency has depreciated since September 2011 when the duty- free import was allowed.
Apparel export to India, however, increased sharply in the just-concluded fiscal (2013-14) as against previous year. In the last fiscal, Bangladesh exported apparel products worthy about US$ 96.25 million as against US$ 75.21 million in the previous year, marking a 28 percent growth.  
Garment manufacturers attributed this growth mainly to the duty waiver offered by the Indian government to Bangladesh and high demand for basic garments among the growing middle-class consumers over there.
Traders forecast more trade between Bangladesh and northeast India if the existing non-tariff and para-tariff barriers were removed and connectivity improved through infrastructural development.
"Bangladeshi exporters often face problems as India refuses to accept certification of Bangladesh Standards and Testing Institution (BSTI), although Bangladeshi entrepreneurs are highly competitive and capable of competing with any country," said BKMEA vice-president Mohammad Hatem.
According to the Confederation of Indian Industry (CII), the two-way trade stood at US$6.6 billion in 2013-14 with India's exports at US$6.1 billion and imports from Bangladesh at US$462 million. The volume of trade between the two countries was $5.34 billion in fiscal 2012-13, according to data from the Indian High Commission in Dhaka. Bangladesh's exports to India fetched $563 million in fiscal 2012-13, leaving Bangladesh's trade deficit at $4.7 billion.
According to a study conducted by the Bangladesh High Commission in New Delhi, harsh testing requirements, complex harmonised code classifications, inadequate infrastructure, and special labelling requirements are among major non-tariff barriers that Indian authorities have imposed on Bangladeshi exports.
The study also noted that Indian authorities impose mandatory standard requirements, additional technical regulations, and difficult banking norms. Apart from that, the Indians authorities also slap duties, other than tariffs, and restrict the entry of Bangladeshi trucks into India.
Exporters complained that each item of food consignment is subjected to certification by port health officers, which takes more than a month, and seriously hampers export of food items to India.
About the export of soaps, sources said, all types of soaps are subjected to chemical tests and samples are sent to laboratories that take more than a month to issue clearance.
Despite huge demand for cement, steel products, electrical and electronic goods, and leather products in northeast India, these products need to comply with Indian Bureau of Standards' (BIS) mandatory marketing and standard requirements, which also affects exports, the deputy high commissioner noted to explain the trade slowdown.
Most of the land customs stations on the Indian side have no warehousing facilities, and goods exported from Bangladesh are kept in the open until customs formalities are over. This hassle, in turn, results in huge damage and inconsistent supply of goods.
The number of bank branches in northeastern India that are allowed to handle foreign currency transactions and open letters of credit is very limited. Even these are not authorised to carry out direct transactions with Bangladesh. This is seen in trade circles as a major impediment to Bangladeshi exports getting into the landlocked north of India.
 "The existing para-tariff and non-tariff barriers, imposed often by Indian authorities on shipments from Bangladesh to India, are major obstacles, hindering growth of Bangladesh's exports to India," said an entrepreneur.
He sees the prospect of Bangladesh's current level of exports to India posting two- to three-fold increase if these barriers are lifted.